CII – Cost Inflation Index From 1981-1982 To 2016-2017:

Cost Inflation Index : Indexation is a process by which Cost of acquisition is adjusted against inflationary rise.  Every year Govt notifies Cost Inflation Index which is used for calculating Long term capital gains.

When investor sells its property then CII index is used to determine current indexed value.

Govt have recently notified CII for year 2016-1017.Historical values of CII are as follows:

Financial Year	Cost Inflation Index
1981-1982	100
1982-1983	109
1983-1984	116
1984-1985	125
1985-1986	133
1986-1987	140
1987-1988	150
1988-1989	161
1989-1990	172
1990-1991	182
1991-1992	199
1992-1993	223
1993-1994	244
1994-1995	259
1995-1996	281
1996-1997	305
1997-1998	331
1998-1999	351
1999-2000	389
2000-2001	406
2001-2002	426
2002-2003	447
2003-2004	463
2004-2005	480
2005-2006	497
2006-2007	519
2007-2008	551
2008-2009	582
2009-2010	632
2010-2011	711
2011-2012	785
2012-2013	852
2013-2014	939
2014-2015	1024
2015-2016	1081
2016-2017	1125

Significance of Cost Inflation Index:

Suppose

• Ramesh purchased residential property in June 2006 :@ Rs.16 Lakh
• He sold this property in June 2015: @ Rs.60 Lakh

Then for calculating indexed value of property, CII of corresponding years will be used:

 

Ramesh will calculate Capital gains based on this indexed cost.

 

Long term Capital Gain will be calculated as:

Sale value under consideration after Expenses paid towards brokerage, advt & indexed cost of improvement

(Less)

Indexed Cost of acquisition 

 

After Calculating capital gains, Ramesh has options as below to claim exemption from LTCG tax:

1. Buy Residential property of value equivalent to capital gains.This property must be purchased either 01 yr Before OR 02 Yrs After sale of property.
2. Property need to be bought on sellers name only to claim exemption.
3. If investor invests in under construction property then Construction of property must be completed within 03 Yrs after sale of property.As per one of court verdict,if builder of new construction fails to hand over property within 03 yrs,exemption is still allowed.
4. Invest capital equivalent to capital gains in 54EC capital bonds @6% (interest paid annually) issued by NHAI or REC, with in 06 months of sale of property.
5. If entire capital gains is not invested then proportionate exemption will be allowed.
6. If he decides to pay tax then he will need to pay long term capital gain tax at rate of 20% + surcharge + Cess on capital gains.